Lodsys claims momentum in patent fight as some indie devs leave US (Updated)

With foes like Lodsys "you'd have to be insane to launch anything significant" in the US.

Patent holding company Lodsys claims it's gaining momentum in its battle with independent developers. The company posted two new blog posts on Monday evening—after almost a year and a half of silence—claiming it has both gained the favor of the US Patent and Trademark Office and made a number of new patent licensing deals with smaller companies. But some of the indie developers targeted by Lodsys have begun chest-thumping in response, declaring that Lodsys "needs to be stopped."

In its first post, Lodsys claims more than 150 companies have paid to obtain the rights to its patent portfolio, with "more than 4 out of 5" choosing to do so outside of litigation. "These companies have realized significant savings by taking advantage of lower licensing rates," Lodsys wrote.

Indeed, it's no surprise that a number of companies have chosen the licensing route. When Lodsys began going after mobile app makers in 2011, first starting with iPhone developers and then spreading to Android and other platforms, it threatened expensive patent infringement lawsuits if the developers didn't cough up some cash to license the patents. Some developers—apparently "more than 150"—ended up being scared into going the licensing route due to their relative size, as many mobile app makers are small shops with limited resources.

Apple has also been green-lighted to intervene in Lodsys' lawsuit against some iOS developers. (The lawsuit targets developers who made use of Apple's API for in-app purchasing, but Lodsys says the developers owe licensing fees regardless of the fact that Apple itself owns a license for that functionality.) But Lodsys' second post this week touches on the in-app purchase patent by bragging that it has the USPTO on its side.

"As a part of the Inter-Parties Reexamination requested by Google, the USPTO recently issued an Office Action confirming Claim 24 of US Patent 7,222,078. This claim is particularly relevant regarding in-app purchases and free-to-paid application upgrades," the company wrote. "In addition, we have every confidence that all claims will ultimately be confirmed through this lengthy process. In-app purchase features and free-to-paid upgrades will be a part of the litigation process that is now swiftly moving forward."

The patent firm goes on to point out that Apple's ability to extend its own licensing rights to third parties "remains unresolved and clearly contested."

Other app makers have been fighting back against Lodsys on their own. A number of iOS developers banded together last year to create a group—open to developers of all platforms—called the Appsterdam Legal Defense team in order to fight back against non-practicing entities (NPEs) like Lodsys. By the end of 2011, the group brought on board its own intellectual property attorney. And, in June of this year, the group went a step further by teaming up with "patent research community" Article One in order to help independent app makers look up prior art and make informed decisions about licensing.

The group's founder, Mike Lee, was hardly surprised at Lodsys' latest claims. "Lodsys is designed to fight companies like Apple and Google. What they're not designed to do is fight thousands of tiny players, all determined to make themselves the biggest pain in the ass possible through guerrilla legal tactics, all worth very little actual money," Lee told Ars on Tuesday.

But Lee thinks there is more at stake than just individual developers being bullied. He said ever since creating Appsterdam and the Appsterdam Legal Defense Team—which he is no longer running, but continues to be involved with—he's now exposed to a steady flow of programming talent looking to move from the US to Europe in order to avoid such lawsuits.

"Every non-American organization trying to unseat Silicon Valley as the world leader in technology production should be popping champagne" over Lodsys' continued claims, Lee said. "More patent madness means more talent flowing into Europe, which is great, because it means we can start using our embassies to kick some of that over to countries like Greece and Italy who could definitely use the work."

Lee confirmed his apparent glee at the benefit to the European economy is meant to be ironic, because he believes software patents are costing jobs in the US by forcing developers to move their operations overseas. As a result, Lee added that NPEs like Lodsys should be stopped ASAP.

As an example, Lee pointed out that his two new companies have engineers from San Francisco who have moved to Amsterdam to launch their technology. "[T]he fact that any new technology coming out of the US is immediately infected by parasites like Lodsys means you'd have to be insane to launch anything significant there."

Update: Article One has issued a statement in response to Lodsys' blog posts. "The 150+ licenses that Lodsys is fighting for is money that is being deferred from innovation by small app companies in order to only further inflate the pockets of Non-Practicing entities," Article One CEO Cheryl Milone told Ars. "In order to keep the doors of innovation open, small companies need to have the flexibility to invent without being penalized."

Appsterdam Legal Defense Team has also issued a statement in response to Lodsys.

"Remember the creepy kid in high school that tried to convince you that huffing gas was cool because 'everyone was doing it'. In a set of disturbingly short posts, Lodsys uses the same trite argument to justify its extortionist business model," attorney Mike McCoy told Ars."The timing of the posts follows Apple's statement that it sold 5 million iPhone 5s during launch weekend. That's a lot of new iOS users and developers around the world are most likely seeing a sales boost. Think of these posts as yet another knock on the development community's door, followed by a "businessman" in a very expensive suit saying, 'Look, just pay up like everybody else and keep quiet.'

"Unfortunately for Lodsys, the numbers are pretty disappointing. Given the sheer volume of licensing "requests" sent to developers over the past year, 150 licensees is a pathetic return on investment. Within the Appsterdam community, I believe that developers have been sufficiently warned about Lodsys and their scare tactics. Outside of that sphere, unfortunately, it appears some have chosen to enter into a license.

"And therein lies the principal problem with patent trolls. If even one license is secured, it gives unnecessary credibility to a horribly written patent."

Jacqui Cheng
Jacqui is an Editor at Large at Ars Technica, where she has spent the last eight years writing about Apple culture, gadgets, social networking, privacy, and more. Emailjacqui@arstechnica.com//Twitter@eJacqui

The group's founder, Mike Lee, was hardly surprised at Lodsys' latest claims. "Lodsys is designed to fight companies like Apple and Google. What they're not designed to do is fight thousands of tiny players, all determined to make themselves the biggest pain in the ass possible through guerrilla legal tactics, all worth very little actual money," Lee told Ars on Tuesday.

Yeah, those little guys might be worth something, if fucktard's like YOU didn't sue them into oblivion!

It's only the mega-corps like Apple, Microsoft, and Google that can withstand an onslaught of patent litigation.

Mike Lee is the founder of Appsterdam Legal Defense, not Lodsys, which is why he is responding to Lodsys's claims with a response that says something negative about Lodsys. If he was the founder of Lodsys, his response would have been closer to meaning 'we will crush these tiny ants' rather than the current meaning of 'one of us may be weak, but together we can take down giants.'

Took a pic of the box with the phone camera, then zoomed the photo to match up with the box under it and snapped a pic of that. Like those 'transparent' laptop desktop shots that were so trendy a couple years ago. I have yet to actually open the box, it's sitting in a pile with some Star Wars LEGO waiting for Free Time™ that never seems to come. My wife randomly buys me sets sometimes, that's mostly how I acquire them these days.

Maybe the patent system needs changing so that if you don't produce anything you can't hold a patent on it.

I understand the sentiment but the problem with that is that it negatively impacts little guys. Imagine you invented a new product or technology. You don't have the resources to develop it in to a consumer product so you try to shop it around. The first company you show it to could tell you to pound sand and then build it on their own since you don't build anything.

I'm not sure what the answer is but something like, if you are BIGGER than a certain size, you can't sue companies smaller than a certain size. That has just as many holes but the answer has to be able to protect little companies from predators more so than the large companies.

Assuming that the goal of the patent system is to encourage innovation by the granting of temporary monopolies, how does the ability to transfer them help with that? Wouldn't the dissolution of such a thing negate a great number of patent trolls, who simply acquired their patent from someone else?

Took a pic of the box with the phone camera, then zoomed the photo to match up with the box under it and snapped a pic of that. Like those 'transparent' laptop desktop shots that were so trendy a couple years ago. I have yet to actually open the box, it's sitting in a pile with some Star Wars LEGO waiting for Free Time™ that never seems to come. My wife randomly buys me sets sometimes, that's mostly how I acquire them these days.!

I use my 4 year old as an excuse to buy LEGOs. He can't build them yet but loves watching me do it. And I just hate having to do that.

Maybe the patent system needs changing so that if you don't produce anything you can't hold a patent on it.

I was thinking more along the lines of: "NPE's can hold patents but have very high limitations on the amounts of money they can acquire by licensing those patents, perhaps 10% of what they currently receive; and can't sue for more than a set amount with those patents."

I think flat-out saying that they can't have patents is going perhaps too far (even if they deserve it). It just shouldn't be a way of business for a company to sit on it's patents and live off the interest while contributing nothing to the world in terms of its own products.

I believe that curtailing the practice of "patent trolling" by NPE's would do a lot for fixing our economy, as it would be very encouraging for start-ups to know that they won't get sued out of the market by the NPE's.

i never understood why apple incorporates the in app purchasing thing into the API if the developers still need a license to use it.

That is what this is about. Apple has patents that cover that for the developers who use their API, but Lodsys is claiming that Apple patents are invalid and that each developer must pay a licensing fee to them.

Maybe the patent system needs changing so that if you don't produce anything you can't hold a patent on it.

I understand the sentiment but the problem with that is that it negatively impacts little guys. Imagine you invented a new product or technology.

Chances are you would be buried by some variety of patent troll.

You're better off keeping your secret sauce secret, skipping the patent and it's intent of disclosure, and just reinventing your own wheels as needed. At least with a less patent crazy environment, you will be allowed to reinvent simple things without being sued.

Nonsense patents on trivial things hurt "the little guy" as much as they do anyone else.

I'm not sure what the answer is but something like, if you are BIGGER than a certain size, you can't sue companies smaller than a certain size. That has just as many holes but the answer has to be able to protect little companies from predators more so than the large companies.

Absolutely not this. This is a really, really stupid idea. Don't get me wrong, I love indie developers and the work that they do, they have a ton of creative freedom and are able to produce great things because of it, but if they put into place what you suggest, there is a possibility that a large company with a legitimate patent on something could be in a situation where they can't protect their own patent just because the guy who's using it happens to be too small for them to be able to touch.

Just because we all like the little guy most of the time doesn't mean he's always the good guy, and the big evil corporation is always the bad guy. It's entirely possible for a little guy to be a bad guy and a big guy to be a good guy.

This would be similar to saying that police are not allowed to sue you if you attack them or something, but you are allowed to do it to them. We don't want garbage rules like this messing things up, everything needs to be fair and equal, no matter who you are. Discrimination against the rich or those in power is just as bad as discrimination against those who are weaker or helpless.

What we really need is just a reformed patent system where you can't hold bullshit patents, regardless of who the actual holder is. We need to validate/invalidate patents on their own merits. Absolutely nothing else. I don't know if this would ever be realistically possible, but THIS is the goal to shoot for. Nothing like what you suggest can be good.

I thought everything was supposed to be just peachy in a libertarian free-for-all. Is... it not...?

Don't fall for the anti-libertarian propaganda coming from the radical right and the Randians. Libertarianism doesn't believe in laws that are unnecessary or harmful, but likewise it recognizes the need for regulation that is necessary to prevent harm, like this. It's only nutjobs like Paul Ryan, that subscribe to Ayn Rand's economic policies (a true free market, free meaning free of any and all regulatory control) that think this type of behaviour should be allowed (they have the money, therefor they're better and smarter by doing anything they can figure out to get more money, to hell with the consequences.)

Sorry to drag this down into politics, but the success of all the republican-claiming-libertarian propaganda is troubling. The real party has good intentions and good ideas. It was gaining strength for a long time, and it really feels like this propaganda and complete perversion of the party's ideology started as a response to a threat to the two-party status quo.

EDIT:To be clear, some of Ayn Rand's other ideas were spot on, such as the idea that governments only have power over criminals, so pass legislation to make everyone a criminal. It's only her economic ideas that are truly horrible.

Maybe the patent system needs changing so that if you don't produce anything you can't hold a patent on it.

I was thinking more along the lines of: "NPE's can hold patents but have very high limitations on the amounts of money they can acquire by licensing those patents, perhaps 10% of what they currently receive; and can't sue for more than a set amount with those patents."

I think flat-out saying that they can't have patents is going perhaps too far (even if they deserve it). It just shouldn't be a way of business for a company to sit on it's patents and live off the interest while contributing nothing to the world in terms of its own products.

I believe that curtailing the practice of "patent trolling" by NPE's would do a lot for fixing our economy, as it would be very encouraging for start-ups to know that they won't get sued out of the market by the NPE's.

But what if I have a research lab and the only way I can keep doing my useful research is to get people to license it from me? I don't make a product, but I'm creating useful research that a lot of companies are using.So trying to shut down all patent trolls means you start to hurt research labs.The root of the issue seems to be from the USPTO granting every patent and letting the courts invalidate them.

How about this: No non-practicing entities. I'm guessing I'm simply uneducated here, but what exactly is the purpose of a "non-practicing entity"? As far as I can tell, all they do is act as patent trolls; and as we all read above, this is in no way beneficial to our economy or innovation. To go into more detail as to how I would ban these guys, the first step would be requiring use of a patent in order to license it out to another entity, and use of the patent in order to leap forward with a lawsuit.

That is to say: Bob cannot sue Larry unless Bob has shown that he has produced - and sold - a significant amount of products using said patent; additionally, Bob cannot sue Larry for more than X value of the infringed profits. If Bob wishes to license the patent to Larry, the license cannot cost more than Y, dependent on the current market value of the product.

In this sense, smaller companies with ideas can still sell or license their patents to larger companies which will produce the products, but patent trolls can't go rampaging without actually doing anything for anyone else.

I'm not sure what the answer is but something like, if you are BIGGER than a certain size, you can't sue companies smaller than a certain size. That has just as many holes but the answer has to be able to protect little companies from predators more so than the large companies.

Absolutely not this. This is a really, really stupid idea. Don't get me wrong, I love indie developers and the work that they do, they have a ton of creative freedom and are able to produce great things because of it, but if they put into place what you suggest, there is a possibility that a large company with a legitimate patent on something could be in a situation where they can't protect their own patent just because the guy who's using it happens to be too small for them to be able to touch.

Just because we all like the little guy most of the time doesn't mean he's always the good guy, and the big evil corporation is always the bad guy. It's entirely possible for a little guy to be a bad guy and a big guy to be a good guy.

This would be similar to saying that police are not allowed to sue you if you attack them or something, but you are allowed to do it to them. We don't want garbage rules like this messing things up, everything needs to be fair and equal, no matter who you are. Discrimination against the rich or those in power is just as bad as discrimination against those who are weaker or helpless.

What we really need is just a reformed patent system where you can't hold bullshit patents, regardless of who the actual holder is. We need to validate/invalidate patents on their own merits. Absolutely nothing else. I don't know if this would ever be realistically possible, but THIS is the goal to shoot for. Nothing like what you suggest can be good.

I am not advocating anything. Just throwing stones. I even mentioned that there were holes in that idea. My point was that if we are going to suggest, like the comment I replied to, changes to the patent system to get rid of NPE's like Lodsys, don't turn a blind eye to other non-producing patent holders. Not all are scum and many can make our lives better. Don't throw the baby out with the bath water and all.

I agree with your suggestion of doing away with BS patents more than eliminating NPE's. Too much collateral damage.

I've been pouring tons of effort and risk into an indie game on my own time. I think, "maybe if I work hard enough, I can have some amount of success and even hire some help. I'd be a 'job creator!'" Then I read crap like this, and it makes me wonder if I'm an idiot for even bothering to try and build something in this country.

What I don't get is how this situation doesn't run afoul of the patent double-dipping rules. If someone holds a patent and licenses that patent to someone making a chip, they're not allowed to require someone building a product including that chip to license the same patent- this is established patent law. Apple already has licensed the lodsys patent in one of their patent bundles they've paid for, so how can Lodsys be going after developers over the same patent Apple licensed without running afoul of the double-dipping rule?

i never understood why apple incorporates the in app purchasing thing into the API if the developers still need a license to use it.

That is what this is about. Apple has patents that cover that for the developers who use their API, but Lodsys is claiming that Apple patents are invalid and that each developer must pay a licensing fee to them.

Maybe I'm just misunderstanding what you said, but I don't think Apple has patents covering this. I think they licensed the patents from Lodsys to cover this, and insist that this covers their app developers who are using the licensed system as well. Lodsys however, insists that this covers only them, and third party app developers need their own licenses.

I use my 4 year old as an excuse to buy LEGOs. He can't build them yet but loves watching me do it. And I just hate having to do that.

You need to trust a bit more in the abilities of your four year old! Not to brag, but mine was able to build some lego sets (with some help) and enjoyed it tremendously to work together. but then all kids develop at different speeds for different skills.